Saturday, January 06, 2007

China Raises Reserve Requirements

I just noticed this headline roll across on the Bloomberg website. Damn fractional reserve banking. But I can't help but to wonder what effect this will have on China's growth. I mean, from 11% annualized to, say - guessing here - maybe 8-9%? Just a thought that ran through my head. But better consistent, stable growth than a giant flameout on overzealous credit creation. Right?

I wonder if anyone has ever tried to determine, quantitatively, how much of an increase in reserve requirements is equivalent to a 100 bp increase in lending rates in any country's economy (China, US, Euroland, anywhere)? Hmmm.